Correlation Between Tesla and Illumina
Can any of the company-specific risk be diversified away by investing in both Tesla and Illumina at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Tesla and Illumina into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Illumina, you can compare the effects of market volatilities on Tesla and Illumina and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Tesla with a short position of Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Illumina.
Diversification Opportunities for Tesla and Illumina
Modest diversification
The 3 months correlation between Tesla and Illumina is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina and Tesla is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Tesla Inc are associated (or correlated) with Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of Tesla i.e., Tesla and Illumina go up and down completely randomly.
Pair Corralation between Tesla and Illumina
Given the investment horizon of 90 days Tesla Inc is expected to generate 1.73 times more return on investment than Illumina. However, Tesla is 1.73 times more volatile than Illumina. It trades about 0.09 of its potential returns per unit of risk. Illumina is currently generating about 0.02 per unit of risk. If you would invest 20,188 in Tesla Inc on August 27, 2024 and sell it today you would earn a total of 15,068 from holding Tesla Inc or generate 74.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Illumina
Performance |
| Timeline |
| Tesla Inc |
| Illumina |
Tesla and Illumina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Illumina
The main advantage of trading using opposite Tesla and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla position performs unexpectedly, Illumina can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Illumina will offset losses from the drop in Illumina's long position.The idea behind Tesla Inc and Illumina pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Illumina vs. Thermo Fisher Scientific | Illumina vs. Danaher | Illumina vs. Waters | Illumina vs. IDEXX Laboratories |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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